Convertible Bonds Are Specifically Revised Down To The Terms Of The Trigger And Announcement Effect

As the important content of convertible bonds, the special terms of downward revisions(which is called ’special terms’ for short) show when to cut conversion price. The conditions are an important means to safeguard the rights and interests of bond holders.In 1992, the first convertible bond was issued, but it was not until 2000 that the first special term appeared. Previous scholars’ study of convertible bonds rarely focuseson the special term itself.Therefore, this article attempts to discuss the evolution of the special terms’ content, and this article also turned share price cut announcement effect from lower conversion price.This article divides the evolution of the special terms’ contentinto four stages, and uses descriptive statisticsto analyze the trigger of lower conversion price. According to the results, the greater gap between the initial conversion price and the fixed bottom line, the more likely conversion price is to be cut. And companies are more likely to cutconversion price in a bear market.Compared with the first two years after the issue, of companies are more likely to cut price in the later survival period. However, the trigger contentand convertible bond market trading volume have no obvious relationship with whether the conversion price will be cut or not.In addition, the survival model has been used to study the announcement effect of conversion price cut. At the same time, Cox regression model is usedto judge which covariate has a significant effect on survival time. This paper found that the change trend of abnormal returns after the announcement in most cases is at 1 day. And probably because of that, compared with event study method, survival model may not be so suit to be used in the announcement effect. Eventually I failed to find significant factors which affecting the distribution of survival time. This is the deficiency of this article.